cost benefit analysis Flashcards
what is Cost-benefit Analysis (CBA) definition
Economic analysis that assesses whether the outcome (benefits) outweigh the input (cost) of program or intervention
what does Cost-benefit analysis compares?
compares the value of all resources consumed (costs) in providing a program or service against the value of the outcome (benefits) from that program or service.
what is theoretical roots of CBA?
Welfare economics is used to help make decisions regarding public policy by incorporating individual preferences and values to improve social welfare while balancing the effective use of resources.
what are the advantages of CBA
Comparing Multiple Programs with Different Outcomes
Programs with similar, as well as dissimilar, outcomes can be compared.
The decision maker can determine which programsβ costs will exceed the
benefits and vice versa.
Disadvantage of CBA?
Placing a monetary value on the outcome or benefit in CBA presents a challenge.
Key Points of CBA?
Yield on investment
Can compare very different programs
Developed for societal decision making
Alternatives may include in CBA?
Interventions from the same program
Interventions from different programs within the same sector
Interventions across different sectors.
Determination of Indirect and Intangible Benefits?
The two most common methods seen in the pharmacoeconomic literature are:
Human Capital Method (HC)
Willingness-to-Pay Method (WTP)
Human Capital Method (HC)
It calculates HC based on wage rate and missed time due to illness, requiring income estimates from various sources and self-reporting for missed time.
Willingness-to-Pay Method (WTP)
the WTP method determines how much people are willing to pay to reduce the chance of an adverse health outcome.
what are two common indicators used for the comparison?
Net Benefit (NB)
Benefit-Cost Ratio (BCR)
Benefit-Cost Ratio (BCR)
πππ = Total Benefit/ total cost
Net Benefit (NB)
ππ = Total Benefit β Total Cost
BCR or NB > 0
Benefit > Cost = Intervention is worthwhile
BCR OR NB < 0
Benefit < Cost = Intervention is NOT worthwhile
